It is commonly argued that poorly designed banking system safety nets are largely to blame for the frequency and severity of modern banking crises. For example, “underpriced” deposit insurance and/or low reserve requirements are often viewed as factors that encourage risk-taking by banks. In...

Three economic environments are reviewed and, in each, organizations play an essential role. For an adve rse selection insurance economy, the authors find that when mutual in surance arrangements are permitted, an equilibrium necessarily exists and is optimal. This example, and two others,...